Duration: 3:35

Level: Beginner

This lesson explores the role of Big Data in augmenting traditional fundamental analyses, as well as some of the tools offered by IBKR that support socially responsible investing.

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Study Notes:

In our previous lessons, we highlighted how many investors are likely to find that conducting fundamental analysis on ESG-related issues can be quite a daunting task – especially given the massive amounts of variables that may be considered relevant.

To address this concern, many companies and organizations have been working to establish more advanced, technological tools and scoring systems to aid in the effort.

Advanced Technology: AI & Big Data

For example, certain companies may employ artificial intelligence, with sentiment analysis algorithms, and natural language processing, to help arrive at data that may assist in ESG investing analysis.

S&P Global, for instance, recently noted that ESG investing could become more methodical and accessible with AI technologies. With this in mind, the company recently said the Dow Jones Sustainability Index, the original index of sustainable investments from S&P Dow Jones Indices, aims to use AI to speed up analyses and augment traditional research.

Many researchers also agree that using Big Data as a driving tool for conducting fundamental analysis is likely to reduce issues in corporate disclosures, such as timeliness, accuracy and adherence to stated policies – especially since ESG-related information lacks the same set of standards and generally-accepted principles as applied to financial data.

Moreover, certain studies indicate that there appears to be a correlation between media sentiment about a company and its stock’s performance. According to data services provider Refinitiv, for example, stocks tend to outperform after being associated with media sentiment that is high, and when sentiment falls, it may be a warning sign that prices are also likely to decline.

To this end, through its MarketPsych Analytics, Refinitiv produces data by distilling news and social media content through a curated language framework, which not only measures different emotions like optimism, confusion, and urgency, but also financial language and specific topics, such as interest rates and mergers.

Meanwhile, FactSet-owned Truvalue Labs – another data service provider in the ESG space – can access more than a hundred thousand online sources with unstructured text, such as social media posts. And besides dynamic web feeds, Truvalue Labs’ internal ESG analysts also identify specialized sources to find ESG data, with the company also able to draw on more than two thousand sources residing behind paywalls.

In fact, the socially responsible investing (SRI) data behind IBKR’s Impact Dashboard is fueled by Refinitiv and Truvalue Labs, who use the unstructured data they collect to compute scores within common frameworks, including ESG and SASB, among others.

Again, the scores calculated by Refinitiv and Truvalue Labs are derived from thousands of company and non-company resources, including annual reports, regulatory filings, trade blogs, industry publications and social media.

More About Refinitiv’s and Truvalue Labs’ Tools and Resources:

ESG Scores from Refinitiv

At A Glance: Truvalue Labs’ Insight360 Data Feed

Dynamic Materiality In The Time of COVID-19

Truvalue Labs – ESG Research in the Information Age

 

Disclosures

The information in this presentation is provided for informational purposes and should not be relied on for tax, legal or accounting advice. Before engaging in any transaction, you should consult your own tax, legal and accounting advisors.


Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Supporting documentation for any claims and statistical information will be provided upon request.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.